Lucinda Creighton (Dublin South East, Fine Gael)
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I wish to raise the important issue of NAMA and its efforts to date in pursuing developers who owe money to the agency, particularly focusing on the foreclosure of bankrupt developers. I raise this matter having already submitted a parliamentary question to the Department of Finance, to which the response from the Minister was less than satisfactory.

As far back as 13 April, Mr. Brendan McDonagh, the CEO of NAMA, appeared before the Oireachtas Committee on Finance and the Public Service and made estimates and projections for how and when bankrupt developers and unco-operative developers would be pursued. At that point, Mr. McDonagh stated that NAMA would start to foreclose on bankrupt developers by September, after assessing how they intended to deal with their debts. He clearly stated at that meeting that NAMA would take a strong view and would apply a zero value to developers' personal guarantees when considering loans.

The disappointing aspect of all of this is that, to date, NAMA has worked on 12 potential cases where legal action is being taken against some of these people. So far, as matters have proceeded through the Commercial Court, it has been clear that NAMA has been ineffectual and ill prepared when dealing with these cases. For example, on 18 October, Mr. Justice Peter Kelly criticised what he described as the sloppy and careless manner in which legal proceedings were being brought by the various banks in efforts to recover multimillion euro debts. He noted that in one case taken by Anglo Irish Bank, the bank's legal team sued for €3 million, as opposed to the €9 million owed. It is clear that the banks in their proceedings in the Commercial Court, along with NAMA in its failure to progress matters through the legal system, are failing in their duty. There is a significant duty of care now to the taxpayer, who has pumped billions of euro into Anglo Irish Bank, Bank of Ireland and AIB, and there should be some return for this in terms of reckless developers being pursued to ensure they do not get of scot free.

It is puzzling to the public that one developer could be heard on an RTE radio programme on Saturday talking about the salary he could expect to receive from NAMA. As we know, NAMA has not even set a cap on the fees that will be paid to developers. This grates with people because they do not understand why salaries are being paid to developers who were reckless by their own admission and why those fees have not had a maximum level put in place.

There have been delays in identifying properties that have been transferred into the names of developers' spouses. There are lists of properties that have been identified in the national press owned by developers where substantial assets worth up to €2 million have been transferred since 2008 into the names of the developers' spouses. When properties have been transferred within the five years, NAMA is well within its rights to set aside those transferrals.

I hope there will be a more detailed answer from the other side of the House than was the case in response to my parliamentary question.

Seán Haughey (Dublin North Central, Fianna Fail)
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NAMA has made significant progress in the ten months since its establishment last December. In its second quarterly report, released earlier today, NAMA recorded a profit of €6 million in the three months to the end of June 2010. The report also illustrates that loans are continuing to transfer on schedule to NAMA, which in turn has begun to directly manage those loans for the first time.

NAMA advises that it is currently engaging directly with some 30 debtors. As their loans are acquired by NAMA, debtors are being asked to produce business plans which will set out detailed and credible targets for reducing their debt. It is not an option for debtors to survive on taxpayer-funded life support until the market improves; a debtor must set out how he plans to reduce his debt significantly over a three to five year horizon. For most debtors this means identifying assets which can be sold to raise cash which will be used to repay debt. NAMA will endeavour to work with debtors where this is a commercially feasible option. It will work with debtors who are co-operative, in asset funding and in the lifestyle implications for them. The agency will also work with debtors who can prove they possess the will and the managerial capacity to deliver on targets. In cases where they cannot do so, the only option will be foreclosure.

NAMA expects the property underlying the loans it acquires will be worth about half of the amount advanced by banks. That is the most that NAMA could notionally recover today if it foreclosed on all debtors. The market, however, is in no condition to absorb a large volume of property sales currently. NAMA's best interest, therefore, is served by working with debtors, where possible, to enable them to improve their capacity to repay their debts.

The coming months will be pivotal for NAMA in its key decisions on the viability of individual debtors. The agency will seek to optimise the income it can extract from loan portfolios. Part of that involves ensuring debtors pay to NAMA all of their available cash flows in circumstances where they are unable to fully meet their current interest repayment obligations. While it may be seen as an obvious step, NAMA is discovering it was not, by any means, the universal practice among financial institutions to secure asset cash flows for purposes of debt repayment. Other options available to NAMA include debt rescheduling, loan restructuring and the potential sale or assignment of loans or loan portfolios to third parties. This will be assessed on a case-by-case basis and the decision will be dictated by commercial criteria.

Inevitably, it will be necessary to foreclose on debtors incapable of managing the burden they have taken on. Accordingly, NAMA will become more the manager of a portfolio of property assets. To date, NAMA has approved enforcement action on 15 debtors. Not all of this will lead to actual enforcement, as the experience so far has been that debtors begin to co-operate when faced with actual enforcement. In cases in which NAMA will enforce, it will have to pursue the normal avenues through the courts in Ireland and elsewhere.

Banks and debtors are enduring significant pain as part of the current process - the banks through the write-downs they must accept on the sale of their loans to NAMA; debtors, through loss of their equity. NAMA has advised it is well placed to break even, or do better, on behalf of the taxpayer. The agency will pay no more than a realistic price for the loans it acquires and has the advantage of time to extract optimal value from the loans and from any property it may acquire through foreclosure.

While not directly related to this Adjournment matter, it should be noted that NAMA yesterday was successful in facing down the first significant legal challenge it encountered with a comprehensive ruling in its favour in the High Court. There should be no doubt that the agency will pursue developers who owe money to it and foreclose on bankrupt developers where this is the best course of action to take.